Paul Grewal Takes On the SEC vs. Ethereum: Analyzing the Implications for the Crypto Market:

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SEC’s planned move to open the Pandora box of the dollar industry is again in question with Ethereum ETFs. In mid-January, the SEC bravely approved 10 spot bitcoin ETFs after a decade-long regulatory battle. Meanwhile, they’re denying ETH ETFs due to legal clarity? Let’s break out the situation. 

The SEC isn’t engaging with potential ETH ETF issuers as it did before approving spot bitcoin ETFs on Jan. 10. Analysts James Seyffart and Eric Balchunas highlight this contrast. They said that the SEC has recently delayed approval for several spot Ethereum ETFs, raising doubts about approval by May 23 and reducing investor confidence in the investment vehicle.

Paul Grewal Challenges SEC’s Stance on ETH

The SEC has no good reason to deny the ETH ETP applications. And we hope they won’t try to invent one by questioning the long established regulatory status of ETH, which the SEC has repeatedly endorsed. That’s not how the law works. And Americans deserve better. 10/10

— paulgrewal.eth (@iampaulgrewal) March 20, 2024

Paul Grewal has shed some light in a series of X posts and tackled myths circling Ethereum and its uncertain future in ETFs. He began by emphasizing ETH’s pivotal role in crypto since its inception in 2015, highlighting its widespread adoption and importance to millions of Americans. Before he became SEC Chair, Grewal referenced statements by senior SEC officials, including Gary Gensler, affirming ETH’s classification as a commodity rather than a security.

Moreover, he pointed out that even recent SEC trial lawyers compared ETH to Bitcoin (BTC), proving its standing as a commodity. Grewal also referenced the classification of ETH as a commodity by the CFTC and that ETH futures contracts have been trading on CFTC-regulated exchanges since 2021.

He concluded his posts by stating that ETH doesn’t meet the Howey test criteria, which is crucial for deciding if an asset is a security. He argued that ETH wouldn’t be considered a security even under the Howey test. He urged the SEC to stick to its stance on ETH and avoid creating excuses to reject Ethereum ETF applications, stressing the need for fair and transparent rules for investors and the crypto market.

The Biggest Ticking Point 

The SEC has postponed its verdict on several applications, including those from Ark Invest, Hashdex, Grayscale Investments, and BlackRock Inc., regarding the approval of Ethereum ETFs. VanEck’s proposal is slated for a final decision on May 23.

The biggest breaking point in delaying the decision lies in the SEC questioning whether Ethereum qualifies as a security or a commodity. Sumit Roy from etf.com notes that while Ethereum exhibits characteristics of both, the SEC appears hesitant to classify it definitively. Instead, it may prefer legal clarity on the matter before deciding.

SEC is open to public comments on concerns related to market manipulation and fraud, echoing issues that blocked the swift approval of spot bitcoin ETFs.

Despite the bullish sentiment, Ethereum’s price has experienced recent volatility. While it surged 40% year-to-date, the past week saw a downturn, with prices dropping below $3,300 and an overall decline of 12% in the last five days.